© Reuters. FILE PHOTO: A man watches an electrical panel showing the Nikkei index outside a brokerage in a business district in Tokyo, Japan on June 21, 2021. REUTERS/Kim Kyung-Hoon
Written by Tom Westbrook
SINGAPORE (Reuters) – Asian stocks jumped on Thursday, bonds pared losses and oil prices held sharp gains as investors appeared to have pushed aside virus fears for now and looked to the European Central Bank for reassurance that policy support would continue for some time.
MSCI’s broadest index of Asia-Pacific shares outside Japan followed Wall Street higher and rose 1% with broad gains from Sydney to Seoul and Hong Kong. Japanese markets are closed until Monday.[.AX][.KS][.HK]
There was no clear catalyst for the recent bounce in stocks, or the pullback on Friday and Monday, although Wednesday’s study showed both. Pfizer (NYSE:) and AstraZeneca (NASDAQ:) have been effective vaccines against delta-variable coronavirus.
“Investors every now and then look for reasons to take some profits and this is what we’ve seen,” said John Bai Liu, portfolio manager at Tribeca Investment Partners in Sydney.
“The market suddenly became concerned about the delta variable and how it might affect the course of the recovery,” she said. “But what we compared 12 months ago is a few viable vaccines…Eventually we’ll come out of this much closer to the end than we were 12 months ago.”
However, unlike Wall Street, most Asian indices struggled to recoup losses early in the week as Asia struggles with a growing outbreak in an unvaccinated population and as nerves linger around China’s regulatory crackdown on tech companies.
Shares of debt-laden Chinese property developer Evergrande rebounded about 11% in Hong Kong after it said it had resolved legal disputes with a lender.
Elsewhere, resilience in the US dollar – which traded near its recent peak for several months early in the Asian session – suggests that currency markets remain very cautious.
It sat at 92.812, off a three-month high of 93.194 and the euro was flat above recent lows of $1.1791.
“The dollar is trading in full swing regardless of the fluctuations in risk sentiment in recent days,” Westpac analysts said in a note backed by the view that higher inflation could drive up US interest rates.
Analysts said a shift to a more structurally dovish European Central Bank would boost the dollar index at higher levels, with a possible test of year highs this quarter.
On the LAGARDE watch
With the data schedule mostly bare on Thursday, the European Central Bank’s policy-setting decision, scheduled for 1145 GMT, and the subsequent press conference from President Christine Lagarde, are the main focus for markets.
Lagarde instilled traders with a sense of anticipation after reporting an adjustment to the bank’s rate guidance to reflect a new, more flexible strategy for inflation targeting.
“To really enforce its credibility, the ECB could tie its rate path to a clear calendar date — that is, not raise rates until late 2024,” said Luke Suddards, strategist at brokerage Pepperstone. “This will be a cautious surprise to the currency markets and put pressure on the euro pairs.”
Interest rate markets in Asia slowed, with trade weakening by the Tokyo holiday, after an overnight sell-off in Treasuries that left the yield on the benchmark 10-year US government debt at 1.2884%. [US/]
Investors are watching a partisan standoff brewing in Washington over the US debt ceiling, as the US Treasury is expected to exhaust its borrowing power in October, putting upward pressure on short-term interest rates overnight.
In commodity markets, oil held onto most of Wednesday’s sharp price rally, its biggest one-day gain in three months. Futures were last up 0.4% at $71.94 a barrel, but rose more than 4% on Wednesday.
Gold was flat at $1,801 an ounce and cryptocurrencies were flat after bouncing off their lows when Tesla CEO Elon Musk (NASDAQ 🙂 said the automaker will likely re-accept bitcoin payments after due diligence on its energy use.